SECURITIES AND EXCHANGE COMMISSION
Washington, D .C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 22, 1999
EARTHLINK NETWORK, INC.
(Exact name of registrant as specified in its charter)
Delaware 000-20799 58-2389244
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(State of Incorporation) (Commission File Number) I.R.S. Employer Identification Number)
3100 New York Dr., Pasadena, CA 91107
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(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (626) 296-2400
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Item 5. Other Events
Agreement to Merge with MindSpring Enterprises, Inc.
On September 22, 1999, EarthLink Network, Inc. ("EarthLink"),
MindSpring Enterprises, Inc. ("MindSpring") and a specially created new
company entered into an Agreement and Plan of Reorganization (the "Merger
Agreement"). Pursuant to the Merger Agreement and subject to stockholder and
regulatory approval, EarthLink and MindSpring will each merge into the new
company (the "Merger"). The Merger is structured to be a stock-for-stock
merger of equals. In the Merger, each outstanding share of EarthLink common
stock will be exchanged for 1.615 shares of newly-issued common stock of the
new company and each outstanding share of MindSpring common stock will be
exchanged for one share of newly-issued common stock of the new company.
Other outstanding securities of the companies will be converted on the same
basis. The parties intend for the Merger to be considered a tax-free
reorganization under Section 368 of the Internal Revenue Code of 1986, as
amended and as a "pooling-of-interests" for accounting purposes. The new
company shares issued in the Merger will be registered under the Securities
Act of 1933, as amended, and will trade on the Nasdaq National Market under
the symbol "ELNK." Upon the closing of the Merger, the new company will be
renamed "EarthLink Network, Inc."
In connection with the Merger, the new company will assume EarthLink's
alliance agreements with Sprint Corporation. As a result, Sprint will have the
right, among others, to appoint up to two (2) members to the new company's board
of directors and to purchase additional shares of equity securities in the new
company in order to maintain, but not exceed, a 27.8% ownership level. The new
company will also assume MindSpring's outstanding 5% convertible subordinated
notes and the indentures pursuant to which the notes were issued. The Merger
will give rise to the MindSpring noteholders' right to have the new company
repurchase the notes at 100% of the principal amount plus accrued interest to
the date of repurchase. Under the Merger Agreement, any notes presented for
repurchase will only be repurchased for cash.
The new company will be managed by executives from both EarthLink and
MindSpring. In the new company, Charles "Garry" Betty, EarthLink's President and
Chief Executive Officer will be Chief Executive Officer; Charles Brewer,
MindSpring's founder, Chairman and Chief Executive Officer will be Chairman;
Michael McQuary, MindSpring's President and Chief Operating Officer will be
President; and Sky Dayton, EarthLink's founder and Chairman will be a director.
The Board of Directors of the new company will consist of 13 members,
assuming that Sprint exercises its rights to maintain its ownership level in the
new company at or above 20%. The Board of Directors will be divided into three
classes. Mr. Betty and Mr. Dayton have been designated as two of EarthLink's
four initial appointees, and Mr. Brewer, Mr. McQuary, Campbell Lanier and
William Scott (each of whom are currently serving on MindSpring's Board of
Directors) have been designated as MindSpring's four appointees to the new Board
of Directors. Sprint has designated William Esrey and Len Lauer (currently
serving on EarthLink's Board of Directors) to be its appointees to the new
board. A special nominating committee has been formed to select, prior to the
closing of the Merger, three (3) additional outside directors to serve on the
new Board of Directors.
EarthLink and MindSpring each have granted the other an option to
purchase up to 19.9% of the granting company's shares of common
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stock, exercisable under certain circumstances following the termination of
the Merger Agreement. The Merger Agreement contains a $70 million termination
fee payable under certain circumstances in connection with termination of the
Merger Agreement (the termination fee plus any economic benefits obtained
pursuant to the exercise of the 19.9% options may not exceed $80 million).
Certain significant stockholders have entered into stockholder voting
agreements under which they have agreed to vote their shares of stock in
favor of the Merger.
The companies anticipate that the transaction will close during the
first quarter of 2000.
A copy of the Merger Agreement is included as Exhibit 2.1 hereto. A
copy of the stock option agreements are included as Exhibits 2.2 and 2.3 hereto.
A copy of the form of stockholder voting agreement is included as Exhibit 2.4
hereto. A copy of the joint press release issued by the parties announcing the
execution of the Merger Agreement is included as Exhibit 99.1 hereto.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) Exhibits.
2.1 Agreement and Plan of Reorganization, dated September 22, 1999, among
EarthLink Network, Inc., MindSpring Enterprises, Inc. and WWW Holdings,
Inc.
2.2 Stock Option Agreement, dated September 22, 1999, between MindSpring
Enterprises, Inc. and EarthLink Network, Inc.
2.3 Stock Option Agreement, dated September 22, 1999, between EarthLink
Network, Inc. and MindSpring Enterprises, Inc.
2.4 Form of EarthLink Stockholder Agreements, dated September 22, 1999,
between certain stockholders and EarthLink Network, Inc.
2.5 Form of MindSpring Stockholder Agreement, dated September 27, 1999,
between certain stockholders and MindSpring Enterprises, Inc.
99.1 Press Release, dated September 23, 1999, announcing execution of a
definitive agreement to merge with MindSpring Enterprises, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EARTHLINK NETWORK, INC.
Date: September 30, 1999 By: /s/ Grayson L. Hoberg
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Grayson L. Hoberg, Chief Financial Officer
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EXHIBIT INDEX
Exhibit
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Number Exhibit
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2.1 Agreement and Plan of Reorganization, dated September 22, 1999, among
EarthLink Network, Inc., MindSpring Enterprises, Inc. and WWW Holdings,
Inc.
2.2 Stock Option Agreement, dated September 22, 1999, between MindSpring
Enterprises, Inc. and EarthLink Network, Inc.
2.3 Stock Option Agreement, dated September 22, 1999, between EarthLink
Network, Inc. and MindSpring Enterprises, Inc.
2.4 Form of EarthLink Stockholder Agreements, dated September 22, 1999,
between certain stockholders and EarthLink Network, Inc.
2.5 Form of MindSpring Stockholder Agreement, dated September 27, 1999,
between certain stockholders and MindSpring Enterprises, Inc.
99.1 Press Release, dated September 22, 1999, announcing execution of a
definitive agreement to merge with MindSpring Enterprises, Inc.
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[Exhibits and Schedules Intentionally Omitted]